Ben & Jerry

Increasing competitive pressure and Ben & Jerry’s declining financial performance has brought a number of takeover offers. Henry Morgan is a member of the board of directors of Ben & Jerry’s Homemade and was elected to represent the interests of the shareholders. Morgan will attend the board meeting for considering the pending offers. If the firm takes the offer, the firm will lose control of its assets and social orientation; however, Ben & Jerry’s shareholders would like the offer to be accepted.

Despite his concern for Ben & Jerry’s social interest, he has to decide whether or not to accept a takeover offer. Four offers are currently on the table. The bidders are Dreyer’s Grand, Unilever, Meadowbrook Lane, and Chartwell. Each offers different prices and proposals. Rejecting offers and finding ways to create value would be another alternative solution for Ben & Jerry’s. However, accepting Unilever’s offer seems to be the best solution for Ben & Jerry’s Homemade.

Analysis

The problem is that Morgan has to choose between his concern for the company’s social interest as a member of the board of directors and the interest of the shareholders as their representative. Ben Cohen and Jerry Greenfield, the cofounders of Ben & Jerry’s, and Morgan feel that the firm will lose control of assets by accepting an offer. They know the company’s social orientation requires corporate independence. Since Ben & Jerry’s was founded in 1978, the firm has emphasized social objectives in every aspect of the business, including marketing, operations, and finance.

The firm’s mission statement also includes social dimensions as well as product and economic dimensions. Ben & Jerry’s has tried to seek new and creative ways of fulfilling each without compromising the others. If a large traditional company takes over Ben & Jerry’s, the firm’s social mission may or may not survive. Despite Morgan’s concern for Ben & Jerry’s social interest, he has to stand for Ben & Jerry’s shareholders to represent their interest. Shareholders would be best served by selling out to the highest bidder.

For a company with great brand awareness, about a 45% of market share of the super-premium ice cream market, successful new product rollouts, and decent traction in its international expansion efforts, puttering share price around $21 is not what Ben & Jerry’s shareholders expected. An alternative is that Ben & Jerry’s could reject the offers and find new ways to create more value; however, as most shareholders believe, selling out makes more sense. Financial key indicators show that poor financial performance is due to poor management of Ben & Jerry’s assets rather than the economic situation or material cost.

The firm was able to meet its social and product quality goals, but did not meet maximizing shareholder’s value due to poor management. The firm’s key financial performance indicators (EBIT, Net Income margin, and ROE) show that Ben & Jerry’s has not met shareholders’ expectations, while the revenues stably increased (Exhibits 1 and 2). Selling out is also the best option to use clientele effect because it may positively affect the price of the stock when the firm’s circumstances change. Therefore, selling out may increase the firm’s market cap as well as the shareholders’ value.